Author Archive for Jeff Deist

Update on Toshio Murata, student of Mises in 1959-60

Toshio Murata was a student of Mises in New York, and translated Human Action into Japanese. He is almost single-handedly responsible for creating an Austrian/Misesian movement in Japan.

Marc Abela of Mises Japan sends us this update, along with some photos of this amazing man recently giving a presentation at age 90:

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Entering his 90s this year, professor Toshio Murata, direct scholarship student to Mises back in 1959-60 in NY, picture taken earlier today, close to Murata-sensei’s home in Nagano prefecture (Japan).

Murata-sensei shared with us the several meetings he would get invited to where Hazlitt would at times show up to proofread Mises’ English, or with Ayn Rand and others (Bettina Greaves, etc) around or showing up in some of the seminars… He was right in New York when Hazlitt was working on renewed editions of his One Lesson (1946) and remembers to this day being handed out freshly printed versions of the new edition on their way to the store (he was probably referring to the 1961′th edition I guess with the added new chapters here and there). Stories go back 50+ years back in time and Professor Murata is turning 91 this year, but all his memories remain quite impeccable it seems.

 

Mises U Starts Tomorrow! Don’t Miss Free Live Streaming of Your Favorite Speakers

Join the Mises Institute as we welcome more than 130 students from all over the world to our Auburn campus! Mises U 2014 is a full week of Austrian scholarship that can’t be found anywhere else on the planet.

Judge Andrew Napolitano, Tom Woods, Walter Block, Bob Murphy, Robert Higgs, Tom DiLorenzo, and many other other scholars are among this week’s faculty.

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Here are just a few highlights:

Tom Woods: Four Things the State is Not.
Walter Block: The Case for Privatization- of Everything.
Judge Andrew Napolitano: The Constitution and the Free Market
Guido Hulsmann: The Cultural Consequences of Fiat Money

The full schedule is here.

Stream the speakers live on YouTube here, or enroll and participate as an online student here.

Steve Forbes Promotes a Gold Standard

Steve Forbes, speaking recently in Las Vegas, continued to advocate a gold standard of sorts–  i.e. pegging the US dollar to gold at (say) $1200 per ounce.  If gold rises to $1300, the Fed decreases the supply of dollars.  It it falls to $1100, the Fed inflates.

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He should be commended (as a representative of mainstream politics and the mainstream financial press) for talking about gold, money, and monetary policy generally.  Plus he makes some very good points about the moral hazards engendered by today’s Fed policy:

“People feel that the link between effort and reward has been eroded,” Forbes said.

Inflation, which is nudging upward in the United States, is a “tax,” Forbes said. He questioned how Fed policies that are causing rising inflation and boosting the cost of living for a typical American by $1,000 a year are helping the economy.

With the current quantitative-easing policies, the Fed will keep its bloated balance sheet, Forbes said. The Fed’s action is taking money out of economy and giving it to a wasteful federal government – hurting small businesses that need to be healthy to create jobs, he added.

“The big banks are now simply hand maidens of the federal government,” Forbes said.

“When we had a gold standard, there was little currency trading,” Forbes said. “Now, volume in currency trading is high.”

Fundamentally, however, Forbes’s plan cannot work for the same reason monopoly political institutions cannot work. No central bank can operate independent of financial and political pressure.  Do we expect Congress to insure the Fed adheres to the proposed gold peg rule?  Will Congress mandate this statutorily?  Will the Fed relax or abandon the rule for wars, depressions, and other government-created calamities?

If Forbes really wants to end crony capitalism, why not simply join Ron Paul and advocate free competition in currency?  Then the grand Fed experiment known as the US Dollar can sink or swim based on the preferences of consumers.

 

Ron Paul Was Dead Right about the Export-Import “Bank”

Just as certain conservatives have attempted to latch on to Ron Paul’s anti-Fed movement (purely for populist political gain), some also recently discovered that the non-bank known as the Export-Import Bank represents (gasp) a form of corporate welfare!

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Who knew that Boeing needed a little help from taxpayers like you to sell those beautiful new 737-800s (and they are beautiful) to EgyptAir, for instance? According to the GAO, the Ex-Im Bank finances or guarantees financing for about 25% of Boeing’s sales of wide-body aircraft.

Here’s Dr. Ron Paul arguing against Export-Import Bank reauthorization back in 2002:

In conclusion, Mr. Chairman, Eximbank distorts the market by allowing government bureaucrats to make economic decisions in place of individual consumers. Eximbank also violates basic principles of morality, by forcing working Americans to subsidize the trade of wealthy companies that could easily afford to subsidize their own trade, as well as subsidizing brutal governments like Red China and the Sudan. Eximbank also violates the limitations on congressional power to take the property of individual citizens and use it to benefit powerful special interests. It is for these reasons that I urge my colleagues to reject H.R. 2871, the Export-Import Bank Reauthorization Act.

Read the entire statement (which is excellent) here.

Grudging Nod to ABCT from The Economist

The Economist is often wrong about economics and world affairs.  Worse still, it is almost uniformly tedious and overbearing in tone: its writers generally sound like exasperated parents having to explain for the hundredth time what everybody knows.

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But here an Economist blogger gets one thing right, in a piece otherwise riddled with errors (everybody knows that Austrians are wrong about QE and hyperinflation, everybody knows that Austrians favor a dystopian, selfish world, etc).

The insight of Austrian economics that seemed pertinent to me is that credit cycles can be hugely destructive, as the credit often does not find its way into productive uses; just drive around Ireland and see the abandoned houses built a decade ago if you want an illustration. Before 2007, most economists seemed to think that credit didn’t matter, except when it caused inflation; that is clearly wrong.

Clearly the central bank apologists are getting nervous, and they should be.  Even the high priestess of the US Fed is warning that “Monetary policy faces significant limitations as a tool to promote financial stability.”

SIR: Perhaps she can push harder on the string.

 

The Giants of Austrian Economics, Multilingual Version!

Click here for the image in 28 glorious languages! Many thanks to Mises Institute Summer Fellow Dante Bayona.

Poster AE China

FedSpeak Translated

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Paul-Martin Foss provides a helpful translation of Janet Yellen’s recent speech before the IMF, for those who don’t understand the (wildly inflated) language known as FedSpeak.

An example:

FedSpeak:

Although it was not recognized at the time, risks to financial stability within the United States escalated to a dangerous level in the mid-2000s. During that period, policymakers–myself included–were aware that homes seemed overvalued by a number of sensible metrics and that home prices might decline, although there was disagreement about how likely such a decline was and how large it might be.

Translation: Nobody remembers what I said back in the mid-2000s and these journalists are too lazy to go back and fact-check my record, so I can get away with saying this. They’re not going to watch Peter Schiff’s video about me, in which he demonstrates within the first ten minutes that I had no clue during the mid-2000s that there was a housing bubble.

Nor will they read the speech I gave in January 2007, stating that “While the decline in housing activity has been significant and will probably continue for a while longer, I think the concerns we used to hear about the possibility of a devastating collapse—one that might be big enough to cause a recession in the U.S. economy—have been largely allayed.”

And they definitely won’t read my speech from February 2007, in which I said that “I believe that a soft landing is the most likely outcome over the next year or two.”

Or the speech from April 2007 in which I said: “While a tightening of credit to the subprime sector and foreclosures on existing properties have the potential to deepen the housing downturn, I do not consider it very likely that such developments will have a big effect on overall U.S. economic performance.”

And I really hope they don’t find my prediction from July 2008, less than three months before everything imploded: “I expect the economy to grow only modestly for the remainder of the year, but to pick up next year. The earlier policy easing by the Federal Reserve will help cushion the economy from some of the effects of the shocks, and the fiscal stimulus program is helping at present. Over time, the drag from housing will wane and credit conditions should improve.”

So Much for Trademarks as Protecting “Property Rights”

Poor billionaire Daniel Snyder, owner of the hapless Washington Redskins, can’t catch a break.  His latest indignity comes courtesy of the US Patent and Trademark office, which administratively cancelled six of his team’s trademarks. Apparently the 1946 Lanham Act forbids the registration of trademarks that disparage a particular group.

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Putting aside any controversy over the team name, this defeat for the less-than-angelic Snyder has nothing to do with property.  Trademarks represent government-granted privileges, not government protection of property rights. So please Mr. Snyder, no whining about “due process.”  Maybe now you’ll start selling jerseys for less than $100!

Steve Forbes Has a New Book on Money

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Steve Forbes was on the Dennis Miller radio show last night promoting his new book about the dollar.  Based on his comments to Mr. Miller, the book proposes something conceptually similar to John Taylor’s “rule-based” Fed, i.e. pegging the US dollar to gold at (say) $1200 per ounce.  If gold rises to $1300, the Fed decreases the supply of dollars.  It it falls to $1100, the Fed inflates.

This Forbes review of the book takes a shot at the Austrian view of “good” money, stressing that money should be understood only as a measure of value for exchange purposes.  But even if one holds that view, it’s hard to get past the distortions central banks cause– rule-based or not.  If the critical role of money is to convey information via prices, is this not an argument for eliminating any chance of misinformation caused by a middleman?

And what of the inherent and insatiable appetite of the political class for monetary inflation to buy votes (while leaving the ravages of debasement for future voters)?  Can a central bank ever truly operate independent of pressure from politicians and politically-connected elites?  Who enforces the new peg, and can it be suspended for “emergencies”? These are questions for Mr. Forbes that our David Gordon surely will address in his upcoming book review.

Mr. Forbes has been reasonably respectful toward Ron Paul, e.g. reviewing (favorably) Dr. Paul’s End the Fed. Forbes should be commended for bringing this issue to the forefront, and for his willingness to criticize the cronyist element of the Fed.  I only wish he (and other conservatives) had been been a little more vocal back when Greenspan was making us all rich, and Dr. Paul was a lonely voice in the wilderness.

 

Forbes Matches Bloomberg for Incoherence on Piketty

Left, right, conservative, progressive- they all get it wrong when it come to Piketty’s  inequality shibboleth (and the proposed “solutions”).

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Exhibit 1 is this drivel from Forbes, complete with light criticism of the reliably awful Peter Orzag.  Orzag (via Bloomberg) pines for a progressive consumption tax, and Forbes is A-OK with that:

There’s much to like in this editorial by Peter Orszag. His two major suggestions for altering the tax system make complete and total sense. Yes, it would be good if we all moved to a progressive consumption tax and it would also be a good idea if we moved to an inheritance rather than an estate tax. There are no complaints from me on either of those scores.

The Forbes article goes on to discuss in detail the niceties of what constitutes a tax on wealth, and what constitutes a tax on consumption.  Since Forbes is “free-market,” it prefers a tax on consumption.  Mr. Orzag’s only sin is that he fails to understand his own proposal properly.

As Ron Paul explained, tax reform is a shell game.  It’s simply a matter of aligning various interests against each other to make sure the other guy pays.

All one needs to know about any tax reform proposal is summarized by the Rockwell Rule:

I really must say this again because it is the most important single point you can remember when evaluating whether to support a tax reform or not: the only trustworthy plan is that one that proposes a lowering or elimination of an existing tax, period. 

Ecuador’s Central Bank Announces Unholy Deal with Goldman Sachs

While gold seems to mostly flow from west to east these days, some of it apparently still flows south to north, according to Bloomberg.  And it flows directly from Ecuador’s central bank into the coffers of Goldman Sachs. Ecuador’s Finance Ministry needs liquidity to cover a projected budget deficit of nearly $5 billion (pikers!) this year, and bond issuances are problematic since a default only 5 years ago.

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Here’s some refreshing candor from central bank president Diego Martinez, via an official statement:

“Gold that was not generating any returns in vaults, causing storage costs, now becomes a productive asset that will generate profits,” the central bank said in the statement. “These interventions in the gold market represent the beginning of a new and permanent strategy of active participation by the bank, through purchases, sales and financial operations, that will contribute to the creation of new financial investment opportunities.”

 

The Biggest Employers in America

Are Fedgov and state universities, according to Business Insider.  The private sector, not the state, is withering away.

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The End of Shopping as Entertainment in America

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In America, Memorial Day weekend (like Labor Day weekend) means big sales at most major US retailers.  But the credit-fueled consumer frenzy of the early 2000s has come to a screeching halt, reports The Market Oracle:

The pundits, politicians and delusional retail CEOs continue to await the revival of retail sales as if reality doesn’t exist. The 1 million retail stores, 109,000 shopping centers, and nearly 15 billion square feet of retail space for an aging, increasingly impoverished, and savings poor populace might be a tad too much and will require a slight downsizing – say 3 or 4 billion square feet. Considering the debt fueled frenzy from 2000 through 2008 added 2.7 billion square feet to our suburban sprawl concrete landscape, a divestiture of that foolish investment will be the floor. If you think there are a lot of SPACE AVAILABLE signs dotting the countryside, you ain’t seen nothing yet. The mega-chains have already halted all expansion. That was the first step. The weaker players like Radio Shack, Sears, Family Dollar, Coldwater Creek, Staples, Barnes & Noble, Blockbuster and dozens of others are already closing stores by the hundreds. Thousands more will follow.

One thing every responsible parent tries to teach children is the difference between need and want.  American consumers may be forced to digest this lesson simply because they’re running out of money and credit.  Shopping may no longer be a weekend diversion, or a form of ersatz therapy.

Of course dead malls have been with us for some time.  But the horrific bust created by the Fed’s unholy and artificial boom will endure for decades to come, in the form of rotting strip malls and ghostly, never-rented office parks.

Memorial Day and the Meaning of Freedom

Memorial Day provides the political class countless opportunities to ruin an otherwise thoroughly enjoyable holiday weekend.  Like clockwork, local congressmen, mayors, city council members, et al. materialize at parades, picnics, and churches to give speeches about “freedom.”

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But what does freedom really mean?

Just as we should repudiate Junk English in economics, we should demand precision when it comes to the language of political posturing! In other words, we should insist that politicians use defined terms (I’m not holding my breath).

In essence, freedom is the absence of state coercion. Nothing more, but certainly nothing less.

Dr. Ron Paul explains this coercive reality behind those invoking freedom while advocating state action:

Few Americans understand that all government action is inherently coercive. If nothing else, government action requires taxes. If taxes were freely paid, they wouldn’t be called taxes, they’d be called donations. If we intend to use the word freedom in an honest way, we should have the simple integrity to give it real meaning: Freedom is living without government coercion. So when a politician talks about freedom for this group or that, ask yourself whether he is advocating more government action or less.

Taking this definition a step further, Hans-Hermann Hoppe describes a free society as the absence of aggression against one’s body and property:

A society is free, if every person is recognized as the exclusive owner of his own (scarce) physical body, if everyone is free to appropriate or “homestead” previously un-owned things as private property, if everyone is free to use his body and his homesteaded goods to produce whatever he wants to produce (without thereby damaging the physical integrity of other peoples’ property), and if everyone is free to contract with others regarding their respective properties in any way deemed mutually beneficial. Any interference with this constitutes an act of aggression, and a society is un-free to the extent of such aggressions.

In The Ethics of Liberty, Murray Rothbard similarly defined freedom as the “absence of invasion by another man of any man’s person or property” (italics in original).

This encapsulates the critical libertarian concept of negative liberty, as opposed to the view of positive liberty in the form of mastery over one’s person and surroundings generally favored by “progressives.”

This definition of freedom is fundamental.  It means free people should be able to use their minds, bodies, and talents to advance their well-being (whether material, intellectual, or spiritual) as they see fit.  It does not mean they can demand freedom from material want, or scarcity, or illness, or unhappiness, or unpleasantness generally.  It does not mean anyone owes them housing, medical care, food, or a “living wage.” It means, in sum, the freedom to be left alone.  And this is precisely what the political class of all stripes cannot abide.

Conservatives Support Higher Minimum Wage

Let’s not kid ourselves: the so-called party of free markets and business supports minimum wage hikes, at least when put to a vote. Ramesh Ponnuru reminds us how GOP Senators voted on the issue back in 2007, and even offers a different approach for conservatives seeking to win the hearts and minds of working-class voters: forget wages, just subsidize low-income folks directly by expanding Nixon’s brainchild, the earned income tax credit.  Of course Milton Friedman also championed the concept of a negative income tax, a con that Hazlitt unraveled in Man vs. the Welfare State.

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Ralph Waldo Emerson was Right…

And so is Arthur Brooks: College graduates today cannot afford to be “City Dolls”!

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“A sturdy lad from New Hampshire or Vermont, who in turn tries all the professions, who teams it, farms it, peddles, keeps a school, preaches, edits a newspaper, goes to Congress, buys a township, and so forth, in successive years, and always like a cat falls on his feet, is worth a hundred of these city dolls” (from Self Reliance).

But why is Mr. Brooks, head of the (ahem) American Enterprise Institute, making this case in the New York Times- the bastion of overgrown, immature, utterly provincial city types?  It’s hilarious when milquetoast conservatives like Brooks try to curry favor with the supposed intelligentsia.  Note that he’s savaged in the comments by NYT readers who are utterly hostile to the mere suggestion that young people work hard and take responsibility for their actions.

Here’s a bold claim: if you work in a DC think tank and/or consider the NYT a serious outlet for news, commentary, and culture, you’re probably a City Doll (albeit perhaps an aging, Baby Boomer version).

By the way, how long has it been since AEI had any interest in actual business “enterprise”?   I guess building bombs and invading countries counts?

The Living Wage Movement Suffers a Setback

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Thankfully the wise Swiss recently voted 76% against an initiative to impose the highest minimum wage in the world, thus slowing momentum for a growing worldwide “living wage” movement. Note that this initiative took the form of a national referendum and a popular vote, rather than a decentralized process undertaken by individual cantons.  This tactic no doubt appeals to living wage advocates in the US, who are eager to use misguided populist sentiment and shove preemptive federal wage laws down our throats without the involvement of pesky state legislatures.

Chapter 18 of Hazlitt’s Economics in One Lesson remains the single best summation of arguments against minimum wage laws.  At a mere 1500 words, it’s an easy read for even the laziest of our statist friends.  The chapter is here, while the entire book (itself an easy read) in pdf form is here.

Please join us in fighting the growing “inequality” meme by demolishing the case for minimum wage laws.  Spread these Hazlitt links far and wide!!

EU High Court Takes the Defamation Morass a Step Further

456px-Court_of_Justice_of_the_European_Union_emblem.svgThe European Court of Justice in Brussels issued a preliminary ruling today that appears to have underlying implications for intellectual property and defamation concepts.

Under this ruling, search engines like Google operating in Europe may be required to remove links to online content deemed unflattering by a user– even if true. And while the article focuses on European attitudes toward privacy, the underlying issue is defamation, i.e. damage to one’s reputation.

If the company in question refuses to remove such links, will the aggrieved party’s remedy be a tort suit for damages? Or will the EU simply provide the regulatory/legal means for compelling specific performance on the part of the company?

Note that search engines don’t “own,” host, or control the unflattering content in question, they merely direct searchers to a list of results from a particular query.  So what, precisely, is the legal theory that justifies compelling a search company not to direct eyeballs to content which exists anyway? American common law recognizes third-party tort liability concepts (e.g. tortious interference with contract)  and third party defamation concepts (e.g. liability for republication), but neither directly apply here even if this was a US case.  In the absence of a common law theory, the court relies on a vague 1995 “privacy” directive, but undoubtedly the court (at least to some extent) is making law on the fly.

Social media sites, by contrast, do host their own content.  But does that content– however unflattering– become the website’s “property” by virtue of user agreements? If so, does the site’s right to control dissemination of its intellectual property outweigh an individual’s “privacy” rights?  In Europe, I’m guessing the answer is no.

As usual, IP and defamation provide an unworkable framework for resolving disputes.  We’re back to well-trodden, fundamental arguments about defamation law, which attempts to grant property rights in one’s own reputation.  But of course one’s reputation is nothing more than the thoughts, opinions, feelings, and attitudes of others– which cannot be owned by the aggrieved party.  Intellectual property concepts don’t help much either, especially when applied to non-scarce online content (i.e. we’re not running out of Instagram photos).

Austrians are not monolithic on IP and defamation.  See Rothbard, Rothbard againKinsella, and Shaffer.  Decide for yourself.

Ex-Pol Discovers Entrepreneurship is Hard

Today’s dose of schadenfreude comes courtesy of former pol David Bonior, who “represented” a US congressional district near Detroit for 26(!) years.  Mr. Bonior may be an ex-Congressman, but against all odds has chosen to remain in Washington DC during his retirement.  And it’s an active retirement, since he has poured some of his personal wealth into two different Capitol Hill restaurants.

Mr. Bonior is now shocked to discover that operating a restaurant, even in the imperial growth city of DC, can be difficult.  He is shocked to discover that simply obtaining a permit to open a restaurant in DC is difficult.  He is perhaps most shocked to discover his own dark side: he would like to make a return on his capital investment in the form of… profit!

He also would like to like to control labor costs, by paying the “tip wage” of $2.36 per hour.  Frankly, this does not sound like a living wage.

The Washington Post has the story.

More on Washington Post Columnist EJ Dionne and the Austrian School

3020281035_4fb652b541_bThis is a very nice takedown of E.J. Dionne and his recent bizarre assertion that the GOP is somehow in thrall to Austrian economics.  The author not only elaborates on the silliness behind Dionne’s pined-for “normal, bipartisan legislation during the Keynesian heyday,” but also blasts David Frum’s nonsensical assertion that the Austrian school somehow encourages conservative hostility toward intellectuals:

Back in 2012, Bloomberg’s Josh Barro and CNN and Newsweek contributor David Frum similarly charged that conservatives’ embrace of Austrian ideas is to blame for “how hostile the conservative movement has become to intellectuals.”  Responding in a piece for ZeroHedge, James Miller of the Mises Institute of Canada, disdains the notion of a great Austrian groundswell among conservative politicians.

If Frum, with all his political credentials, can show me another true blooded conservative that has read through Human Action or Man, Economy, and State, I am all ears.  The fact remains that traditional conservatives aren’t brushing up on their Mises when they aren’t attending Tea Party rallies or asking their Congressman to nuke Iran into smithereens.
Let me guess: Frum considers himself (sniff) one of those trodden-upon intellectuals.

The author also provides a nice refutation of Krugman’s tired “where’s the inflation” argument:

Much is made of the fact that Austrian warnings of hyperinflation have not come to pass. Nobel Prize winner Paul Krugman calls on the Austrian School to admit the errors of its way in light of the supposed economic recovery now underway. In fact, as CNBC Senior Editor John Carney points out, events have unfolded in perfect compliance with Austrian theory.

Krugman is right that many self-styled Austrian economics mavens predicted high inflation. The Austrian model, however, does not.
Part of the confusion lies in the well-known definitional dispute over what is meant by the term “inflation.” In general, most people and economists use inflation to mean “rising prices.” Austrian economics, however, treats rising prices as a contingent phenomenon of an increase in the money supply.
In other words, Austrians will insist that any increase in the money supply is inflation—as a matter of definition. But Austrian economics does not insist that this kind of inflation necessarily results in higher prices.

Of course the Austrian movement is growing, just not in the way Dionne imagines.  Does he really think the political class, left or right, will embrace economic principles that reduce political power?  Then again, maybe he does.  Washington is full of incredibly naive dunces when it comes to the real nature of politics.